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Word Count: 711
Inflation Inflation has been the major economic problem that Latin America has faced in the past century Inflation is when the currency of a country is losing value and the price of goods is increasing In Latin Americas case inflation came into play when the governments of Latin American countries were spending money they didnt have and deficits grew and grew So they could keep spending money the governments would print more money and used this newly printed money to finance their various programs they had in action and ones about to get going By using newly printed money to finance these programs that just added more and more currency in circulation This made the worth of the currency decline and decline Also when you increase the money supply the price of goods rises and since money was losing value the price of goods will increase due to that too With this inflationary spiral as a major part of the Latin American economic landscape the governments efforts to control inflation often failed What many believed was a solution was to increase wages due to higher prices To help fund higher wages governments were printing up more and more money the governments also kept to their commitment the public sector spending which made the deficit grow Economists have said the only way to get inflation under control was to stabilize the economy To do that governments need to cut out deficit spending decease their debts and lower tax rates which will in turn promote more people to spend money If the tax rate is at the proper level the government will be collecting more money at a lower tax rate than it would if there was a high tax rate Which means that the governments can get out of debit quicker What governments could do is to sell bonds to take money out of circulation That could in turn slow down how quickly inflation
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